With current property prices, can future generation afford a property?

With current property prices, can future generation afford a property?

There are always news saying that the next generation may not be able to afford their own property. Maybe one reason is also because people are getting married later, so their partner could not help in the mortgage payment until much later. I was fortunate as my wife was working when we bought our first property together.

There are also news saying that in future, most people will rent instead of buying. They will use the example of people preferring to GRAB instead of driving. Perhaps they should also look at the car sales numbers to conclude this too.

Here are my 6 predictions for the future when it comes to property ownership.

#1 – Trade-off between size, price and distance

A property which is big enough and near enough may be priced out of reach for most people. For example, a full facility condo of 1,000 sq ft and within 15km from the KL city centre is not likely to be affordable to this younger generation in future unless they are within the top tier salaried professionals or own a successful business venture or they have great support from PA MA… (father and mother). Else, they can buy a bigger place but the distance will easily double that of 15km. We can already see such a trend these days.

#2 – Support from government will continue even if not loved by everyone

Private developers will always be able to secure good land parcel, will be able to build a township with all the necessary amenities. That’s why many are building further away but have added many attractive amenities and it’s no longer just a typical mall or supermarket yeah. It could even be a huge theme park!

Meanwhile, the government will still support with affordable projects in future, just like today. The issues of unattractive location and even the perception will remain. Somehow, there’s that thinking that government project is for the needy and less of an investment product. Thus, the development is also for numbers versus really for the demands of the people. This better change…

#3 – Downpayment is still needed. Saving enough will be tough.

Looking at the number of things which are in trend these days meant that people will be attracted to buy versus saving up for a property. Looking at the social media meant that it’s easy to envy friends who are traveling. Thus, more people will travel because this is how they could relax… Everything can be bought online and viral news about something interesting to buy will travel very fast. No wonder the national savings rate of Malaysians are dropping fast! Here’s an earlier article: “So many have zero savings“ about the state of savings for Malaysians. In brief, it’s not looking bright but change is up to us.

#4 – Median property price vs income will continue to increase

Just look at the numbers for the advanced countries would already tell us this fact. “Well, unless Malaysia is a country which is different from all other countries. “House Prices have grown faster than incomes in most countries.” Briefly, many countries saw property prices rising faster than their income growth. Thus, affordability becomes harder as compared to 2015 as the starting point.

#5 – Loans will still be tough to obtain. 

Imagine a time when Bank Negara Malaysia forces every commercial bank to lend to anyone and everyone who wants to buy a property. I think this is a disaster waiting to happen because soon, the buyers will not be able to pay their monthly mortgages, banks will then have to take a huge pay cut to auction the property off and what IF more than half of all their loans go this route? This is why banks must only lend to people who can qualify instead of anyone and everyone. So, if today is not easy to get the home loan approved, situation will be the same if not harder in the future.

#6 – Most people will SPEND their money versus investing

Many years ago, someone told me that people must invest in their well-being. Vacations will help the person to relax and come back stronger. Haha. Okay, noted. May I now say that the beach we want to go can be nearby versus spending a few thousand just on flights? Can I share that a stay in a 5-star hotel can ALSO be done within Malaysia and there’s no need to pay for flights followed by a much higher 5-star hotel price? There are also those who said taking public transport is impossible, so buying a car is a must! Well, buying a new car is not necessary, buying a car based on people’s perception is also not necessary or buying a car which will make people think higher of us is also a no-no. When we do all these and we kept spending more, then of course we also could not afford properties in the future.

Happy understanding and noting that that next generation needs to also understand that the world does not revolve around them. Richer parents may help but for the majority of us working Malaysians, please continue to read more and understand that financial savviness will be that main ingredient whether we are comfortable when we get older or we start complaining about the unfair world in the future. Cheers.

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